Ideology and Corruption

The most corrupt countries are developing or transition countries, have low income levels, and are closed economies. More interesting, corruption is significantly positively correlated with left-wing governments in a simple cross section of countries – conditional on GDP per capita, income inequality, dominant religion, a recent history of war, and a history of communist rule. Correlation is not causality, however. In this paper, we analyze the direct relevance of government ideology for the extent of corruption, which is a question that has received little attention in the literature so far. Exploiting close electoral races across the world in the post-WWII period in a regression discontinuity design, we compare the levels of corruption in countries where the left wins and loses elections by a small margin, and find that electing a left-wing government has a significant and positive effect on corruption. We also link our results to extended government intervention in the economy and lower-quality bureaucracies under the left.